U.s. investors have $1,000,000 to invest…

Assume the following information:

 

U.S. investors have $1,000,000 to invest

1-year deposit rate offered on U.S. dollars = 12%

1-year deposit rate offered on Singapore dollars= 10%

1-year forward rate of Singapore dollars = $0.412

Spot rate of Singapore dollar = $0.400

 

Should a U.S. based investor Covered interest arbitrage and invest in Singapore? Answer

Yes because the return would be 14.23%

No because the return would be 14.23%

Yes because the return would be 13.3%

No because the return would be 13.3%